BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Claytons rule applies to which of the following accounts?
A
Demand or Term loans
B
Cash Credit Account
C
Overdraft Account
D
Both b and c
Explanation: 

Detailed explanation-1: -The principle of “first in, first out” established in Devaynes v Noble (1816) 35 ER 767 (often referred to as “Clayton’s case"). In the absence of a contrary intention, payments are presumed to be appropriated to debts in the order in which the debts are incurred.

Detailed explanation-2: -The basic idea is that “When money is paid, it is to be applied according to express the will of the payer and not the receiver. If the party to whom the money is offered does not agree to apply it according to the will of the party offering it, he must refuse it and stand upon the rights which the law has given him”.

Detailed explanation-3: -If the debtor expressly intimates at the time of actual payment that the payment must be applied towards the discharge of a particular debt, the creditor must do so. (ii) If there is no express intimation by the debtor, the Law will look to the circumstances attending on the payment for appropriation.

Detailed explanation-4: -Clayton’s case The debtor must announce all the payments of the debt to the creditor that the certain amount which he has paid was the amount paid for the liquidation of that specific debt. If the creditor doesn’t find it right or doesn’t want to accept it, then the creditor has all the right to refuse so.

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